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The eBearing News
February 1, 2006
SKF Reports Fourth Quarter 2005 Results
copyright © 2005 eBearing Inc.
SKF AB (Sweden) has reported fourth quarter 2005 results, disappointing analysts
who have come to expect SKF results to come in above projections. The company was also
hit by profit woes, a nearly 10% sales increase translating into a net up only 2%.
Sales for the quarter were SEK 12.65 billion (USD $1.6 billion), up 9.6% over 2004's SEK
11.54 billion ($1.49 billion) producing an operating profit of
SEK 1.27 billion ($164 million), up more than 7% from 2004's SEK 1.18 billion ($152 million).
SKF said the sales improvement was due to: 1.3% from higher volume, 2.6% from a better price
and product mix, 9.4% from currency effects, offset by -3.7% in structure costs.
But fourth quarter net profit was SEK 862 million ($111 million), up only 2% over
2004's SEK 845 million ($109 million), and sharply below analysts' expectations of
SEK 897 million ($116 million).
Sales in the quarter were flat in Europe, higher across North America and Latin America, and
sharply higher in Asia.
Market reaction to SKF's disappointing profit results was swift, its B shares dropping
by 7% in heavy trading following the announcement.
Looking forward to first quarter 2006, SKF said it expects the market demand for its products
and services to remain on a high level in Europe and Latin America, slightly higher in North
America, and sharply higher in Asia.
Overall, manufacturing levels will remain steady from fourth quarter 2005 through first quarter
2006, although higher in absolute terms due to seasonality.
Industrial Division
Sales in fourth quarter reached SEK 3.28 billion, up almost 19% from
SEK 2.76 billion in 2004. Similarly, operating profit was SEK 465 million, from SEK 362 million
a year earlier, producing an operating margin of 9.3%, up from 8.4% in fourth quarter 2004.
SKF said Industrial Division sales were higher in Europe, and significantly higher in North
America and Asia.
Service Division
Sales in fourth quarter were SEK 4.46 billion, up 17% from 2004's SEK 3.82 billion.
Operating profit was SEK 586 million, from SEK 509 million in 2004, both representing operating
margins of approximately 12%.
Fourth quarter sales in Europe were flat, slightly higher across North America and Latin America,
and significantly higher in Asia.
Automotive Division
Net sales for the quarter were SEK 3.76 billion, up 10% from
2004's SEK 3.42 billion. Although sales were up, operating profit was down sharply to
SEK 92 million from SEK 115 million in 2004, dropping the operating margin to 2.2% from 3.0%.
SKF said fourth quarter sales to the car and light truck industry in North America were down
significantly, while holding flat in Europe. Sales into the heavy-duty truck industry were
significantly higher in North America and flat in Europe.
Auto and truck aftermarket bearing sales were higher in North America and Europe, and slightly
higher in Asia.
Electrical Division
Net sales for the quarter were SEK 509 million, up 7.6% from 2004's SEK 473 million.
Operating profit plummeted to only SEK 15 million from SEK 75 million, for an operating margin
of 0.8% in the quarter, from 4.3% in 2004. SKF said the drop was related to setting aside
reserves of SEK 140 million to support various restructuring activities.
Sales were significantly higher in Asia and significantly lower in Europe.
Aero and Steel Division
Sales, excluding Ovako Steel, were SEK 613 million in 2005, up almost
30% from 2004's SEK 475 million. Operating profit in fourth quarter was SEK 51, down from SEK 90 in
2004, both representing margins of approximately 5.1%.
SKF said in the fourth quarter, the aeroengine bearing business was adversely affected by
high steel prices and supply problems.
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- by Bruce A. Carr
from individual research,
tips and commercial sources.
Copyrighted material; unauthorized reproduction prohibited.
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